Sharon made a $160,000 interest-free loan to her son, Todd, who used the money to pay for his masters at Baruch. Todd’s only sources of income were $25,000 from a florist business he runs part time and $490 of interest on his checking account. The relevant Federal interest rate was 5%. Based on the above information: a. Todd's business net profit will be reducod by $3,000 (0S x $60,000) of interest expense.
b. Sharon must recognize $3,000 (0.05 x $60,000) of imputed interest income on the below- market loan.
c. Todd's gross income must be increased by the $3,000 (05 × $60.000) imputed interest income on the below market loan.
d. Sharon does not recognize any imputed interest income and Todd does not recognize any imputed interest expense.
e. None of the above is correet.

Which of the following statements is correct? large corporations are taxed more favorably than sole proprietorships. corporate stockholders are exposed to unlimited liability. due to limited liability, unlimited lives, and ease of ownership transfer, the vast majority of u.s. businesses (in terms of number of businesses) are organized as corporations. most businesses (by number and total dollar sales) are organized as partnerships or proprietorships because it is easier to set up and operate in one of these forms rather than as a corporation. however, if the business gets very large, it becomes advantageous to convert to a corporation, mainly because corporations have important tax advantages over proprietorships and partnerships. most business (measured by dollar sales) is conducted by corporations in spite of large corporations’ often less favorable tax treatment, due to legal considerations related to ownership transfers and limited liability.

Consider the following two projects. both have costs of $5,000 in year 1. project 1 provides benefits of $2,000 in each of the first four years only. the second provides benefits of $2,000 for each of years 6 to 10 only. compute the net benefits using a discount rate of 6 percent. repeat using a discount rate of 12 percent. what can you conclude from this exercise?

Your sister is thinking about starting a new business. the company would require $375,000 of assets, and it would be financed entirely with common stock. she will go forward only if she thinks the firm can provide a 13.5% return on the invested capital, which means that the firm must have an roe of 13.5%. how much net income must be expected to warrant starting the business? a. $41,234b. $43,405c. $45,689d. $48,094e. $50,625